A major recession is coming in the U.S., the Deutsche Bank warned.
According to a report sent to the banks’ clients, a deeper downturn caused by the Federal Reserve efforts to tame the highest inflation in decades will have a greater impact on the economy.
“We will get a major recession,” Deutsche Bank economists warned, becoming the first major bank to forecast a bigger than expected impact on the economy.
The bank noted that while inflation may be peaking, it will take a long time before it gets back to the Fed’s 2% target. The central bank’s stand on rising interest rates will make things worse.
“We regard it… as highly likely that the Fed will have to step on the brakes even more firmly, and a deep recession will be needed to bring inflation to heel,” Deutsche Bank economists wrote in a report titled, ‘Why the coming recession will be worse than expected.’
Just two weeks ago the German bank said the Fed will push the economy into a “mild” downturn beginning late 2023. Today, the bank rose some eyebrows again going from a “mild” to a “major” in its forecast.
Further supply-chain disruptions caused by the war in Ukraine, covid lockdowns in China and climate change will keep hurting the global economy.
Deutsche Bank sees the economy rebounding by mid-2024 as the Fed reverses course in its inflation fight.